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You are given the following information concerning Parrothead Enterprises: Debt: 10,600 7.1 percent coupon bonds outstanding, with 24 years to maturity and a quoted price of 108. These bonds pay interest semiannually. Common stock: 305,000 shares of common stock selling for $66.10 per share. The stock has a beta of 1.02 and will pay a dividend of $4.30 next year. The dividend is expected to grow by 5.1 percent per year indefinitely. Preferred stock: 9,600 shares of 4.55 percent preferred stock selling at $95.60 per share. Market: A 10.4 percent expected return, a risk-free rate of 5.1 percent, and a 34 percent tax rate. Required: What is the firm's cost of each form of financing? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) Aftertax cost of debt % Cost of preferred stock % Cost of equity % Calculate the WACC for Parrothead Enterprises. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) WACC %
Consider a firm that has assets worth $1,000,000 today. It has a single zero-coupon debt issue with face value $800,000 and a time-to-maturity of five years. What is the risk-neutral probability that the firm will survive to T = 5? What is the value ..
You plan to deposit the funds in a mutual fund that you think will return 4.5% per year.
Robert White will receive from his investment cash flows of $4,450, $4,775, and $5,125. If he can earn 7 percent on any investment that he makes, what is the future value of his investment cash flows at the end of three years?
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Find the internal rate of return for a project requiring an investment of $250,000, where the project promises to provide $85,000 in the first year, $70,000 in the second year, and $100,000 in the third.
Asset W has an expected return of 16.3 percent and a beta of 1.60. If the risk-free rate is 3.2 percent, what is the market risk premium?
Common stock provides a residual claim on a firm's assets. This statement is missing cash flow” at the end of sentence making it only half true.
Suppose you hold LLL employee stock options representing options to buy 10,000 shares of LLL stock. You wish to hedge your position by buying put options with three-month expirations and a $28.58 strike price. LLL accountants estimated the value of t..
An investor has two bonds in her portfolio that have a face value of $1000 and pay a 10% annual coupon. Bond A matures in 15 years, while Bond B matures in 1 year. Why does the longer-term bond price vary more than the price of the shorter-term bon..
Bright Sun, Inc. sold an issue of 30-year $1,000 par value bonds to the public. The bonds had a 12.68 percent coupon rate and paid interest annually. It is now 14 years later. The current market rate of interest on the Bright Sun bonds is 11.60 perce..
You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $13007, which will be depreciated straight-line to zero over its four-year life. what is the project’s average acc..
“The clinical staff member provides the diagnoses that drive each patient’s plan of care and also has a professional commitment to represent the patient and fulfill the patient’s needs. A trustee who runs a successful manufacturing company says, Expl..
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